Following establishment of a study surveilling the UK cloud market for possible big tech anti-competition in September, the government-approved watchdog for the UK broadcasting, telecommunications and postal industries is turning to the CMA to address domination concerns.

The body has expressed belief that the CMA is best poised to undertake further investigation, stating it will allow the authority to further examine any barriers and consider possible interventions for improving consumer experience.

Currently, Amazon Web Services (AWS) and Microsoft Azure lead the cloud market in the UK, with both vendors predicted to hold a 60-70 per cent market share.

Now embarking on the second half of its study, Ofcom has revealed concern regarding limits to competition in the space — such as high profitability at marker leader AWS and consistent growth of profits at Microsoft — and that they will engage closely with the CMA going forward.

According to Ofcom, there are already signs that the following aspects of the cloud market in the UK are harming chances of customers getting the best possible deal for infrastructure:

• Egress fees — hyperscalers have been found to set the fees for data transfer out of the cloud at significantly higher rates than other providers, pushing vendor lock-in and discouraging a switch to an alternative provider.
• Restrictions on interoperability — barriers imposed by leading providers are found to prevent some capabilities from working properly with services from other providers, causing innovation bottlenecks.
• Committed spend discounts — while able to aid cost reduction, these discounts are structured to incentivise customers to stay locked into a single hyperscaler for most or all cloud operations, even when better alternatives are available.

“We’ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world,” said Fergal Farragher, policy director at Ofcom.

“High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services.”

In response to the initial findings revealed today, an AWS spokesperson commented: “These are interim findings and AWS will continue to work with Ofcom ahead of the publication of its final report.

“The UK has a thriving and diverse IT industry with customers able to choose between a wide variety of IT providers. At AWS, we design our cloud services to give customers the freedom to build the solution that is right for them, with the technology of their choice.

“This has driven increased competition across a range of sectors in the UK economy by broadening access to innovative, highly secure, and scalable IT services.”

Going forward, Ofcom invites feedback on interim findings and the overall study up until the 17th May, with a view to publishing a final report by the 5th October.

Related:

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